Inheritence Tax & Estate Planning

Inheritence Tax & Estate Planning

Inheritance Tax (“IHT”) can reduce your family’s wealth considerably. Those wishing to protect family wealth may do so by controlled gifts or strategic planning using reliefs and exemptions from IHT, although this must happen over a period of time.

Protecting wealth is about identifying life events and risks while planning for them in advance.  Our proactive process considers your objectives for family wealth during your lifetime and after.

Planning the passing of wealth to the next generation is complex, especially if that wealth is to grow for more generations. We work with families to understand their current and future wishes and needs. We will explore different potential future scenarios to ascertain what level of control or protection over wealth is desired.

We will help you build a strategy to pass assets in a way that meets the family objectives and is also tax efficient. That strategy may evolve over time and we will proactively review your objectives to ensure family wealth has the best opportunity to benefit those you want it to.

Philanthropic objectives

For many, contributing towards charitable causes is an important element to their goals. The desire may be to make donations to existing charities, whilst for others they desire to create a specific charitable trust. Whatever the chosen route we can provide advise and assist with structuring and managing operationally. We have experience being professional trustees and non-executive directors and can also complete annual accounts and reports to the Charity Commission.

Case Study 1: Mitigating Inheritence Tax

Jane had survived her husband and following his untimely passing, she inherited all his assets. Jane had three children and four grandchildren. Her assets included the family home, a small investment portfolio and a property portfolio. Jane wanted to continue living in the family home and required an income stream from either the investment or property portfolio. Jane wished for the assets to pass to future generations in a manner that they were protected in the event of divorce or bankruptcy and so that the grandchildren could have some benefit although controlled.

Following an agreed fixed fee proposal, we prepared a report setting out options available to Jane and then met several times to discuss her desires. We agreed on a strategy involving placing the property portfolio into a company. Shares were then given away over a period to children and a grandchildren’s trust. The grandchildren’s trust allowed the meeting of school fees tax efficiently. We held annual meetings with Jane and agreed on revising the strategy and provided tax advice on what investments could be made to mitigate inheritance tax. Advice considered discounted gift trusts as well as investing in assets qualifying for business property relief, agricultural property relief and woodlands relief. Jane subsequently invested in assets that would qualify for business property relief after the minimum ownership period and transferred some of those assets to the grandchildren’s trust without incurring chargeable lifetime transfer. We also assisted to amend Jane’s will to ensure some assets on death would go to the grandchildren’s trust.

Case Study 2: International Property Settlement

Marco had established an offshore excluded property settlement many years ago, whilst non-UK domiciled. He was contemplating whether to remain in the UK permanently. Marco and his wife’s personal assets included a lease interest in a London property and a handful of debentures.

We qualified what Marco and his wife’s exposure to inheritance tax was and provided suggestions on how it might be reduced. We also considered the excluded property settlement, which had become exceptionally complicated. We were engaged by the trustees to advise on the benefit of the settlement and how it could be simplified. We undertook this review mindful of Marco’s desire to pass on assets to his daughters and grandchildren. One daughter resided in the US with her family and, therefore, we considered the US implications also.

Following revisions to the structure, we assisted with draft letters of wishes and wills to facilitate the long term plan for passing family wealth.

Case Study 3: Family & Business Future Strategy

Mike and Lucy owned shares in a trading business, their main home, investment properties, and a stocks and share portfolio. Their company employed their children and had significantly funded their pension scheme.

We provided a staged proposal with fixed fees for an initial quantification of liabilities and outline suggestions for discussion. Following the outline report, we met to discuss the options available. After the first meeting, it was decided that wills would be amended although planning would be postponed until a decision had been reached on the future of the business.

A while later we met with Mike who confirmed that his children did not want to take forward the family business. Mike and Lucy wished to consider the potential of selling the business to management. It was established that the proceeds weren’t required for lifestyle and the funds would ultimately be given to the children. We discussed the possibilities of retaining an interest in the business within a trust, a purchase of own shares and a vendor-initiated management buyout. We also looked at utilising the business property relief available on the shares to fund a trust ahead of the sale. Consideration was also given to how the pension could be used as an estate planning vehicle, placing properties into a company and divesting shares over a period, as well as IHT efficient investments structures.

Contact Edge today for IHT & Estate Planning assistance